One of the questions that eventually comes up in all my Basic Wealth Accumulation Courses deals with Rich VS Poor.  We touch on this in the first section where we deal with a person’s beliefs.  I ask questions around different beliefs about money and about people who have wealth.  Statistics get bantered about like 80% of the world’s wealth is held by 20% of the population.  This makes sense if you believe in the 80/20 rule.

I see the 80/20 rule played out with attendance at the Basic Wealth Accumulation course.  I offer the course to 50 of my college students, and am very gratified if 10 students show up.  (it is more like 5 actually show up.)   When students ask if it really is the case that 80% of wealth is held by 20% of the population, I simply point to the attendance in the room.  Wouldn’t you think more people would come??  If someone would have offered me a course on how to become financially independent 8-12 years after I got out of college, I would have jumped at the chance.

I personally believe that being Rich, or being Poor, is a choice.  It is up to you.  (I will catch a lot of flack for that comment) We are lucky enough to live in a country where the opportunity to become wealthy exists. I will definitely agree that if you are born rich, you have a distinct advantage over someone who is born poor.  But, there are hundreds of cases of people born rich who become poor.  Just as there are many stories of those born poor who become rich.

So what makes one person poor and another rich?  I think it boils down to just 4 things; Belief, Desire, Knowledge, and Effort. 

It is a famous quote of Henry Ford, that says; “Whether you think you can, or you think you can’t – you’re right,”.  This speaks to the power of belief.  If you truly believe that you can/will be rich you can be.  Your beliefs are incredibly powerful.  They can make you rich, or keep you poor.  We explore how beliefs work, and how to change them, as the first part of the course.  If you truly hold the belief that you will never be rich – you’re right.  If you truly believe that you will be rich – you’re right.

What about “Desire”?   Doesn’t everyone desire to be rich?  Of course.  We all desire to be rich, that is why we spend money on lottery tickets and slot machines.  But how deep is your desire?  Will you do anything to get it?  How far will you push yourself to be rich?  What sacrifices will you make to be Rich?    Is your desire deep enough to live in your parent’s basement, not go out with friends, not have a boy/girlfriend, and save every penny you make, if that is what it takes??  By the way, it doesn’t have to be that drastic.

What about Knowledge?  Even if you have the belief, and the desire, do you know what you have, or can do, to get rich?  Where is the College or University course on that? 

Are you willing to put in the EFFORT that it will take?  The old saying that we laugh at, “that the first million is the hardest”, is not a joke.  It is the truth.  Once you have money, it far easier to get more money. Accumulating Wealth is not that hard, most people just don’t do what is required. Keeping the Wealth is not easy either.  Statically 76% of lottery winners are back to their original financial status with 5 years.  Easy come, Easy go.  The book the Millionaire Next Door states that wealth most often only lasts 3 generations.  The first generation builds it, the second generation tries to keep it, the third generation spends it.  This bears out that both Knowledge and Effort are important.

What about families that have been rich for generations?  Those families teach their children from babies, what it takes to get and keep wealth.  The book Rich Dad Poor Dad is a good example of the different ways people look at life and wealth. 

How about a couple of examples?  Why don’t we start with the born rich guy Ted.  He gets $5000.00 a month allowance from Mom and Dad. (don’t we all wish for that.)  Ted has a part time job ($1000 a month take home) because his dad says he has to learn about money. Since Ted is rich, he has to have his own place, and it has to be up to Ted’s standards, so he rents a nice house. ($2000.00 a month).  Ted has to have a nice car, so he leases a brand new BMW sport coupe. ($700.00 a month) Since Ted has the nicest car, he drives his friends around. ($500 a month in gas.)  Ted doesn’t like to cook, so he eats out most of the time.  Being rich, he doesn’t eat at Harveys, he eats in fancy restaurants.  Ted hates to eat alone, so he almost always has someone else he buys for.  Ted also is a big tipper.  Can’t look poor can he. ($2000 a month).  Ted is trying to save so he only allows himself $100.00 a week in spending money. Ted’s total monthly expenses are $5600.00. Ted finds that if he needs new clothes he often has to go and bug mom for extra funds.  Every so often Ted wonders why he can’t save any money for a house of his own, that he wants in 3 years.  But Ted has a great lifestyle.

What would happen to Ted if his parents cut his allowance?

Now let us look at Sally.  She just graduated from college and has her first full time job.  She gets $3200.00 a month take home.  She lives in her parent’s basement and pays $400.00 a month in rent.  Her parents feel it will help her to learn to manage money. She also has a student loan of $400.00 a month.  She takes the bus to work and has a bus pass. ($100.00 a month.)  Sally allows herself $800.00 a month in spending money for clothes, food, entertainment and all other expenses.  Sally is spending $200 a month for courses on money management and investing.  She tries to eat at home at least once a day.  The money she has left at the end of every month, goes into a savings account, and investments.  She wants to buy a house in 3 years. Sally’s monthly expenses are $1900.00. Sally’s lifestyle is definitely not as nice as Ted’s.

If Sally lost her job, and took 4 weeks to get another one, does she have to panic?

Who do you think will own a house in 3 years? 

Ted definitely believes that he is Rich.  But what about his depth of Desire?  Ted’s dad has the knowledge to make money but is Ted learning from him?  Is Ted’s dad helping Ted to learn about Wealth Accumulation really?  How much Effort is Ted putting into his desire for a house?

Sally has a deep belief that she will be rich.  A house of her own is just the first step.  Her desire is very deep, she is saving and investing as much as she can.  She is investing in knowledge to help with her Wealth Accumulation.  Sally is definitely putting Effort into her Desire. 

Does any of this apply to you?  What are your beliefs about money, wealth, and you?  Do you have a deep enough desire to help overcome the financial challenges that all of us have to face?  Are you gaining knowledge about money and investing? (Of course you are, you’re reading this post!) How much Effort are you putting into Accumulating Wealth?  Is it enough?